2Q23 earnings +35% YoY in line; Boom lift in overseas the upcoming driver
浙江鼎力(603338)
Dingli’s net profit in 1H23 grew 45% YoY to RMB831mn, close to the low end of the estimated profit growth of 40-60% announced in mid-Jul. That said, we believe it could be due to the fluctuation of fair value of investment (-RMB64mn) which is non-operational. The results in 1H23 imply record high quarterly net profit of RMB512mn in 2Q23 (+35% YoY). Dingli has identified the overseas, in particular the US, as the key market for its electric, high performing and high margin boom lifts, which will serve as a profitable growth driver in the future. We believe the clear strategic position will help Dingli to differentiate itself from peers. We maintain our TP of RMB67, based on 23x 2023E P/E, on the back of 23% earnings growth in 2024E. Our target multiple remains well below the historical average of 31x. Reiterate BUY. Dingli remains one of the key picks in our universe.
An outstanding set of results in 1H23. Revenue grew 5% YoY to RMB3.1bn in 1H23, driven by the 13% YoY increase in overseas revenue (63% of total revenue). Gross margin expanded 6.4ppt YoY to 34.4%, driven by decline in freight rate and raw materials cost, as well as depreciation of RMB rate. Net finance income surged 147% YoY to RMB216mn, helped by RMB155mn FX gain (+95% YoY). Net profit grew 45% YoY to RMB831mn.
Record high quarterly profit in 2Q23. Revenue grew 6% YoY to RMB1.79bn. Gross margin expanded 5.1ppt YoY to 32.1% in 2Q23. While such margin level is lower than that achieved in 1Q23 (37.6%), it was largely due to the relatively low contribution from China market in 1Q23 (gross margin in China has been 10ppt lower than that in overseas). Net finance income surged 116% YoY to RMB223mn, helped by the depreciation of RMB. Net profit grew 35% YoY to RMB512mn. Operating cash inflow surged 2x YoY to RMB611mn.
Boom lift in overseas will be the key growth driver. Boom lift contributed 38% of the total revenue in 1H23 (up from 28% in 1H22). In particular, boom lift’s overseas revenue surged 89% YoY in 1H23. Gross margin of boom lift expanded 5.6ppt YoY to 25.25%. Going forward, Dingli expects its new boom lift model will be a key driver in the US. With a backlog of ~300 units (1st batch) at present, Dingli expects the delivery to the US will happen in 4Q23E. Dingli believes that the gross margin will be higher than that in China even taking into consideration the anti-dumping and countervailing duties.Dingli expects rising overseas contribution of boom lift (40% in 1H23) will fuel both the revenue and gross margin in future.
